Facebook credits to become a mandatory payment system

Facebook Credits are a secondary currency that can be reloaded using "real" money -- or credit cards. Image: Flickr / Moneyblognewz / CC-BY

Facebook Credits are a virtual currency usable on and through Facebook. First rolled out in late 2009, Facebook credits are purchased with “real” currency. On July 1, 2011, Facebook Credits will become the mandatory currency for all Facebook developers.

The system of Facebook Credits

Facebook Credits are a payment system for use in games and programs built into Facebook. Everything from Farmville plants to Castle Wars medallions can be purchased using Facebook Credits. Currently, the exchange rate is 10-to-1 — 10 Facebook credits for each United States dollar. Facebook Credits can be purchased using PayPal, credit cards and mobile payment systems. Facebook Credits operate in several different currency standards.

Making Facebook Credits required

Today, Facebook announced that it would require all game developers to use Facebook Credits as of July 1. Game developers are still allowed to create and use their own in-game currency, but they can only be purchased with credits. Facebook claims that it is putting this system in place to remove the barrier for entry that setting up payment systems can create. Facebook takes a 30 percent cut of all Facebook Credits transactions. In 2010, just one developer – Zynga – paid $30 million to Facebook to fulfill this 30 percent tax. That leaves 70 percent of the Facebook Credits to be turned over to the game developer.

The future of micropayments

Facebook Credits, much like other online payment systems, are based on the idea of “micropayments” – small payments and purchases, usually less than $5. Facebook Credits means that the company stands to make millions, if not billions of dollars. Facebook has also stated that it hopes to expand the Credits system into a full-blown payment system, much like PayPal or the new Starbucks Card system. These secondary currency systems, however, are prone to failure. In 2008, online game Second Life encountered its own banking crisis that ended up costing users millions of dollars. Will Facebook Credits face the same fate? Only time will tell.